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- What Is a Home Equity Loan?
- How Does a Home Equity Loan Work?
- How Much Can You Borrow with a Home Equity Loan?
- Why Take Out a Home Equity Loan?
- Home Equity Loan Terms and Costs
- Find the Right Loan for Your Needs
- Home Equity Loans vs HELOCs
- Home Equity Loan Pros and Cons
- How Home Equity Borrowing Works with Smarter Loans
- Home Equity Loan Frequently Asked Questions
What Is a Home Equity Loan?
A home equity loan is a form of secured loan; the security in question is the equity in your home, which you may have because of an increase in the market value of your home over your original purchase price, from paying down your original mortgage, or from investing in your home.
fixed interest ratevariable ratespersonal loanunsecured loansHow Does a Home Equity Loan Work?
- Compare home equity loan providers and apply to your preferred lender
- The lender assesses your loan application and either approves or declines it
- In the case of approval, you receive a lump sum to use as you wish
- You make regular payments until the loan is totally paid off
How Much Can You Borrow with a Home Equity Loan?
Current Property Value - Outstanding Mortgage Balance = Home Equity
Why Take Out a Home Equity Loan?
To Consolidate Debt
consolidating debtreverse mortgageTo Pay for Home Renovations
making some improvements to your homeTo Fund Large Purchases or Investments
second property in CanadaTo Enjoy Flexible Repayment Terms
cash flow during tough financial times, such as during job lossHome Equity Loan Terms and Costs
Loan Amount
Loan Term
Payment Frequency
Interest Rate
prime rateSet-Up Cost and Fees
Switching Costs
Find the Right Loan for Your Needs
Second Mortgage
Borrow up to 80% of your home's appraised value (less your remaining mortgage balance)Reverse Mortgage
Borrow up to 55% of your home's appraised value (less your remaining mortgage balance)Apply for a reverse mortgage here!Home Equity Line of Credit (HELOC)
Borrow up to 65% of your home's appraised valuehome equity line of creditHome Equity Loans vs HELOCs
Whether you opt for a one-time payment directly into your bank account, or a revolving line of credit, both home equity loans and home equity lines of credit are a convenient, flexible way to borrow money from your home.
Home Equity Loans
- May have either a variable interest rate or fixed interest rate
- Monthly payments typically include a combination of principal and interest amounts
- You must immediately begin making regular repayments on the lump sum of funds you receive
HELOCs
- Come with a variable rate of interest
- Monthly interest-only payments are typically required on amounts you've borrowed but have yet to repay
- You can choose when and how much of the available funds you use, up to the fixed credit limit
Home Equity Credit Limit and Your Mortgage
Home Equity Loan Pros and Cons
Pro: You can put home equity debt to work for you
Con: Interest-only payments can get out of hand
Pro: Home equity can help finance a second home
Con: Equity-based personal loans have gotten tougher to qualify for
Pro: You can often still get a home equity loan with bad credit
Con: Home equity and HELOC rates can be higher than mortgage loans
How Home Equity Borrowing Works with Smarter Loans
- Second mortgages
- Mortgage refinancing
- Home equity line of credit (HELOC)
- Debt consolidation loan
- Reverse mortgage
Pre-Apply for a Home Equity Loan in 3 Easy Steps
1. Take 30 seconds to complete our application online.2. We find you a lender. 3. You get your loan.Home Equity Loan Frequently Asked Questions
What can I expect when I apply for a home equity loan?
What's the average home equity loans Canada rate?
What are the eligibility requirements for borrowing against home equity?
- Proof of ownership of your home
- Mortgage details
- A recent home appraisal of the market value of your home
How can I use a HELOC to purchase a home?
How does a reverse mortgage work?
Pre-Apply for a Home Equity Loan HereExpert Review & Editorial Standards
This page was researched, written, and reviewed by financial professionals with expertise in Canadian lending regulations. All information is regularly updated to reflect current rates, terms, and regulatory changes.
About Smarter Loans
Canada's independent lending comparison platform since 2016. Trusted by over 2 million Canadians and recognized by the Toronto Star as "the GPS of FinTech Lending." Featured in the National Post and major Canadian publications.
Our Editorial Process
Every page undergoes research, expert writing, fact-checking, and review by our Financial Content Director. We verify all rates, terms, and regulatory information against official sources including FCAC guidelines and provincial lending regulations.
Last Updated: July 30, 2025 | Next Review: Ongoing monitoring
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